Facebook Inc delivers 100 billion messages a day on its WhatsApp messaging app, which it basically offers at no cost. The servers required to enable such a massive amount of communication are not cheap, but it’s worth it for Facebook to absorb the expense so it can keep users on its platform and within its ecosystem. — AFP
Governments around the world are taking major steps to clamp down on the anticompetitive practices of large technology companies. But the quest to rein in the power of these giants may have an unfortunate side effect for consumers: less free stuff.
One of the common themes among global antitrust regulators is that Big Tech has been able to use its vast financial resources and platforms to stifle smaller competitors. Last month’s US House antitrust report contended that big American technology companies such as Apple Inc and Google parent Alphabet Inc have abused their market power to hurt upstarts and extend their dominance into different markets.
This month, China’s antitrust watchdog issued a set of draft regulations that included rules against Internet platforms such as Alibaba Group Holding Ltd selling goods and services below cost, while the European Union said Amazon may have broken antitrust laws by using independent seller data on its marketplace to gain an advantage for its own products.
The goal of all this scrutiny is to root out abuses and create a more level playing field to allow for increased competition. This should benefit consumers in the long run. In the shorter term, however, we may have to accept some unpleasant consequences and inconveniences.
See, we all have grown accustomed to loss-making free services from technology companies. Consumers love Amazon’s free shipping for online purchases, an offering the company has subsidised to the tune of billions in annual shipping losses. Facebook Inc delivers 100 billion messages a day on its WhatsApp messaging app, which it basically offers at no cost. The servers required to enable such a massive amount of communication are not cheap, but it’s worth it for Facebook to absorb the expense so it can keep users on its platform and within its ecosystem. The list goes on and on. But now, under the changing regulatory backdrop, tech companies may be less likely to keep offering these freebies.
It may already be happening. Earlier this month, I came across a seemingly benign announcement pertaining to Google Photos, which until now has provided users with free backup service for an unlimited number of digital photos and videos. The company said it plans to charge for use above a certain storage level starting in June, stating the policy change was needed to keep the service sustainable going forward.
The implication is that hosting more than four trillion photos for nothing is losing the company so much money that it wants users to offset some of the costs. But it’s also true that just the existence of such a free service may hurt the prospects for startups looking to compete with Google in that area. Could Google’s policy change also be a signal it’s getting the message, and would rather take action itself than face the imposition of regulatory remedies?
A Google spokeswoman said this wasn’t the case, adding that consumers have other photo storage options from Apple, Dropbox and Microsoft. I’m not necessarily saying that’s what’s happening here either, though I would note the other services require payment after a certain level of use. Nor am I predicting an imminent shuttering of the industry’s most famous freebies. Free shipping and free messaging will likely go on for the time being. However, I think Big Tech’s playbook of launching products without clear-cut business rationales is on borrowed time. The tide is shifting the other way and we should all be prepared to pay more – or start paying – for things we’ve taken for granted. – Bloomberg
(Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following an earlier career as an equity analyst.)
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